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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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FDIC's Third Quarter Report - Number of Problem Banks Increased to 860


FDIC's Third Quarter Report - Number of Problem Banks Increased to 860

The FDIC released its third quarter 2010 profile on the banking industry. Here are some of the noteworthy excerpts from the press release:

  • Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $14.5 billion in the third quarter of 2010, a $12.5 billion improvement from the $2 billion the industry earned in the third quarter of 2009.
  • The number of institutions on the FDIC's "Problem List" rose from 829 to 860.
  • The total assets of "problem" institutions declined from $403 billion to $379 billion.
  • The Deposit Insurance Fund (DIF) balance improved for the third consecutive quarter. The DIF balance - the net worth of the fund - improved from negative $15.2 billion to negative $8 billion during the third quarter.
  • The FDIC's liquid resources — cash and marketable securities - remained strong. Liquid resources stood at $43.7 billion at the end of the third quarter, essentially unchanged from the second quarter.
  • 41 insured institutions failed during the third quarter (down from 45 in the second quarter)
  • Total loans and leases held by FDIC-insured institutions declined by just $6.8 billion, or 0.1 percent, in the third quarter (there was a $107.5 billion decline in the 2nd quarter)
  • Total insured deposits declined by 0.3 percent ($15 billion) during the quarter (there was a decline of $39 billion in the 2nd quarter)
  • 7,760 FDIC-insured banks and savings associations

Total loans declined by much less than it did in the second quarter. That's a good sign for depositors. With more loan demand, banks will need more deposits and that should help deposit rates. Another thing that should help a little is the reduction of total deposits. However, the decline was smaller than it was in the second quarter. The best case for depositors is when banks have lots of loans and not enough deposits. That requires them to offer higher deposit rates.

The FDIC doesn't name any of the 860 problem banks. Calculated Risk Blog has an unofficial list of 903 problem banks based on public enforcement actions.

So far this year there have been 149 bank failures.

In addition to the quarterly report, the FDIC updated its database with the banks' financial data for the end of the third quarter 2010. In the next few days we should have our database of bank financials updated so our health scores and Texas Ratios will be based on this latest data. You can view a table of banks and credit unions with the worst Texas Ratios in our Bank Health Ratings page. From here you can also search for your bank and credit union to view its Texas Ratio and health score.

BauerFinancial typically takes a couple of weeks to update its ratings. Bankrate.com has been taking one to two months before it updates its ratings.

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Anonymous   |     |   Comment #1
What really bothers me about this is that the list of banks in trouble is kept secret, much like incompetent doctors can keep their misdeeds secret.  Why on earth shouldn't consumers have ALL the facts about a business so they can make an informed decision about where to park their money.  Why would banks even care if they were on this list, so long as they know the public is never going to find about it until the banks are well on the road to failure? If a bank finds itself on this list because of mismangement or incompetence, why shouldn't consumers be informed so they can make other choices.   Protecting incompetence is wrong.

I would assume the only reason the list is so secret is to keep people from moving their money elsewhere and hasten the failure of the sick bank.  So in effect, the powers-that-be are protecting weak banks at the expense of the people using them. 

We hear people complaining all the time about unions protecting incompetent members (teachers for example).  How is this any different?

jeremy33   |     |   Comment #2
To #1:

Because to most of the regular old customers of any bank (call them "average Joes") who have a checking and/or savings account there, and have nowhere near $250K saved in the bank, it doesn't make a bit of difference whether the bank is financially strong or weak. Until the bank fails it can serve their everyday needs for writing checks and receiving their paycheck or Social Security equally well whether it is extremely well capitalized or on the brink of failure. By the same token, the "average Joe" is likely to not realize this, and will strongly overreact  by pulling deposits if he hears that his bank is "in trouble" (even though, as I pointed out, there is no risk of loss to him personally from the situation). Therefore, the bank is more likely to fail, and the less time the FDIC has to plan for a closure and takeover of a financially weak bank, the more it's likely to cost. And those costs are passed on to all the other banks, which indirectly pass them on to everyone.

So it's really for everyone's good.
Anonymous   |     |   Comment #3
Sorry Jeremy but I am going to have agree with the first post.  Protecting businesses who are failing at the very business they are supposed to be doing is unethical no matter what the rationale behind it is.  I understand that interfering in bank operations willy-nilly would be a problem but protecting those banks is wrong.  Average Joes should be given all pertinent information so they can make an intelligent choice where they want to do business.   Businesses that are functioning poorly should fail.  That is what happens in the business world.  Banks should be no different and certainly should not have any agency protecting them by hiding their true standing from the public that uses them. 
Anonymous   |     |   Comment #4
I believe every bank that has been closed has been on the "unofficial list" that depositaccounts posts regularly.
Anonymous   |     |   Comment #5
Wamu wasnt on the list, but anyway the role of the FDIC is to protect customer assets and avoid runs on banks at minimal cost. Publishing names of troubled banks in contrary to this and would only help someone to pick a long term bank. So many opinions on this site arent well founded or thought out, esp the wefare mentality for social security.